ACIT, New Delhi v. M/s. Dabon International India Pvt. Ltd., New Delhi

ITA 5442/DEL/2010 | 2004-2005
Pronouncement Date: 21-07-2011 | Result: Dismissed

Appeal Details

RSA Number 544220114 RSA 2010
Assessee PAN AAACD3039P
Bench Delhi
Appeal Number ITA 5442/DEL/2010
Duration Of Justice 7 month(s) 19 day(s)
Appellant ACIT, New Delhi
Respondent M/s. Dabon International India Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 21-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 21-07-2011
Date Of Final Hearing 20-07-2011
Next Hearing Date 20-07-2011
Assessment Year 2004-2005
Appeal Filed On 02-12-2010
Judgment Text
ITA NO. 5442/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI A.D. JAIN JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NO. 5442/DEL/2010 A.Y. : 2004-05 ACIT CIRCLE - 10(1) NEW DELHI VS. M/S DABON INTERNATIONAL INDIA PVT. LTD. 3 RD FLOOR PUNJABI BAGH 10 ROUSE AVENUE NEW DELHI (PAN/GIR NO. : AAACD 3039P) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : MS. LALITHA KRISHNAMURTY CA DEPARTMENT BY : MRS. PRATIMA KAUSHIK SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 23.9.2 010 PERTAINING TO ASSESSMENT YEAR 2004-05. 2. THE FIRST ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION OF 43 04 3 49/- MADE ON ACCOUNT OF ADVERTISEMENT AND PUBLICITY EXPENSES. 3. ASSESSING OFFICER ON THIS ISSUE NOTED THAT A SU M OF ` 86 08 699/- WAS CLAIMED ON ACCOUNT OF ADVERTISEMENT AND PUBLICI TY EXPENSES. ASSESSING OFFICER FURTHER OBSERVED AS PER DETAILS SUBMITTED BY THE ASSESSEE IT WAS FOUND THAT SUCH EXPENSES COMPRISED MARKET RESEARCH INTERACTIVE PROMOTION AS WELL MEANIN G THEREBY THE ASSESSEE WAS STILL IN THE PROCESS OF PRODUCT LAUNCH /BRAND BUILDING ITA NO. 5442/DEL/2010 2 DURING THE YEAR UNDER CONSIDERATION. HENCE HE OP INED THAT ELEMENT OF CAPITAL NATURE IS DEFINITELY LACED IN THESE EXP ENSES. HOWEVER SINCE THE SALES TOO HAVE RISEN DURING THE YEAR HE TREATED 50% OF THE EXPENSES I.E. ` 43 04 349/- AS CAPITAL IN NATURE A ND DISALLOWED THE SAME. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ISSUE AND HELD AS UNDER:- KEEPING IN VIEW THE FACT THAT THE QUESTION RELATIN G TO THESE EXPENSES WERE PUT FORTH DURING THE FAR END OF ASSES SMENT PROCEEDINGS THE SAME ARE ADMITTED IN ORDER TO IMPAR T SUBSTANTIVE JUSTICE. I HAVE ALSO CAREFULLY CONSIDERE D THE SUBMISSION AND PAPER BOOK FILED BY THE APPELLANT AN D THE RELIANCE PLACED BY THE APPELLANT ON THE CASE OF BER GER PAINT (SUPRA). THE NATURE OF ADVERTISEMENT CASES HAVE ALSO BEEN PROVIDED IN A SUMMARIZED FORM. THESE ARE INTER ALIA RE LATED TO COST OF SAMPLES GIVEN FREE TO DISTRIBUTOR FOR PROMOT ION: WINDOW DISPLAY PARTICIPATION IN VYAPARI MANDAI; ADVERTISE MENT IN MEDIA (INCLUDING PRINT AND RATIO); T-SHIRT FOR DISTRIBUTI ON POSTERS STICKERS VISICOOLERS; PRINTING OF POSTERS FOR PUBL ICITY; MARKET RESEARCH EXPENSES FOR GETTING TASTE PREFERENCES. AL L THE ABOVE EXPENSES ARE CLEARLY RELATED TO ADVERTISEMENT PROMOT ION AND FOR INCREASING MARKET PENETRATION AND PRODUCT AWARENESS AND VISIBILITY AND ARE NECESSARY CONCOMITTENT FOR A PROD UCT MANUFACTURED AND SOLD BY THE APPELLANT WHICH IS HIG HLY DEPENDENT ON ITS MARKET VISIBILITY. I HAVE ALSO GONE THROUGH THE SPECIFIC EXPENSES ON W HICH THE AO HAS COMMENTED IN HIS REMAND REPORT AND AM OF THE VIEW THAT ITA NO. 5442/DEL/2010 3 EXPENSES ON FILM FESTIVAL CONDUCTED BY HINDUSTAN TI MES IN SIRI FORT AUDITORIUM WHERE ABOUT 80000 CHILDREN FROM VARI OUS SCHOOLS PARTICIPATED IS VERY MUCH A PART OF MARKETI NG EXERCISE OF THE APPELLANT AS CHILDREN ARE DEFINITELY THE TARGET GROUP FOR SELLING OF 'CHEESE' PRODUCED BY THE APPELLANT. THE OTHER EX PENSES ARE DISTRIBUTION OF LEAFLETS ON DIFFERENT VARIETIES OF CHEESE/ PANEER; EXPENSES ON KNOWING THE TASTE PREFERENCES OF SCHOOL CHILDREN EXPENSES ON CONDUCTING TASTING/ SAMPLING THE PRODUCT S OF APPELLANT COMPANY AMONG SCHOOL CHILDREN; INTERACTIVE PROMOTIONS AND MAKING SLIDES FOR LEBON MOVIE FIESTA FO R SCHOOL CHILDREN AND PAYMENT TO FRIGOGLASS INDIA P LTD. FO R 15 VISI COOLERS PURCHASED FOR GIVING TO PREFERRED SHOPS FOR STOCKING OF PERISHABLE PRODUCTS OF THE APPELLANT WHICH IS MILK P RODUCTS SO AS TO PROMOTE THE PRODUCT (THESE VISI COOLERS ARE NOT RETURNABLE) ALL THE ABOVE EXPENSES ARE FOR PURPOSE OF ADVERTISEMENT AND PUBLICITY OF APPELLANTS PRODUCT AND ARE THEREFORE ALLOWABLE AS REVENUE EXPENSES. ACCORDINGLY THE ADDITION MADE FO R ` 43 04 349/- IS DIRECTED TO BE DELETED. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT ASSESSING OFFICER HAD DISALLOWED 50% OF THE ADVERTISEMENT AND PUBLICITY EXPENSES ON ADHOC BASIS HOLDING IT T O BE OF CAPITAL NATURE. THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS GIVEN A FINDING THAT NATURE OF EXPENDITURE ON ADVERTISEMENT AND PUBLICITY EXPENSES OF THE COMPANY WAS REVENUE IN NATURE. NOT HING HAS BEEN BROUGHT BY THE REVENUE TO PROVE THAT THE EXPENDITU RE INCURRED WAS OF CAPITAL NATURE. HENCE WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF ITA NO. 5442/DEL/2010 4 THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ACCORDI NGLY WE UPHOLD THE SAME. 7. THE NEXT ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION OF ` 58 50 305/- MADE ON ACCOUNT OF SUNDRY CREDITORS. 8. ON THIS ISSUE ASSESSING OFFICER NOTED THAT A SU M OF ` 58 50 305/- WAS SHOWN AS SUNDRY CREDITORS. ASSESSEE WAS ASKE D TO FURNISH THE CONFIRMATIONS THEREOF. HOWEVER THE ASSESSEE FAILED TO DO SO. HENCE THE ASSESSING OFFICER HELD THAT IN THE ABSENCE OF THE REQUISITE CONFIRMATIONS THE SUNDRY CREDITORS SHOWN BY THE ASSE SSEE AS UNVERIFIED. HENCE HE ADDED THE SAME U/S. 68 OF THE IT ACT. 9. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ISSUE AND HELD AS UNDER:- I HAVE CAREFULLY CONSIDERED THE SUBMISSION AND DETA ILS INCLUDING COPY OF ACCOUNT AND INVOICES FILED BY THE APPELLANT WHO HAS SUBMITTED THAT THE CREDIT FOR RS.58 50 305/- ARE TR ADING LIABILITIES FOR GOODS AND SERVICES AS IS APPARENT FROM THE ACCOU NT OF THESE PARTIES FOR FY 03-04. THAT AFTER FIVE YEARS (IN 20 09) THE APPELLANT IS UNABLE TO FURNISH CONFIRMATION OF THE PARTIES AS SOME OF THEM ARE NOT IN EXISTENCE AND OTHERS ARE NOT RESPONDING TO THE APPELLANT. FROM THE DETAILS FURNISHED IN ANNEXURE T O LETTER DATED 19.08.09 IT IS CLEAR THAT WHILE IN SOME OF THE CASE S THE CREDIT HAVE BEEN WRITTEN BACK IN NEXT FINANCIAL YEAR 04-05 FOR WHICH COPY OF ACCOUNT HAS BEEN ATTACHED IN OTHER CASES PAYMENT H AVE BEEN DISCHARGED IN THE NEXT FY 04-05 THROUGH CHEQUE WHIC H ESTABLISHES THE EXISTENCE OF THESE PARTIES AND ALSO THE FACTUM OF PAYMENT. THAT IN LAW WHEN THE ASSESSING OFFICER HAS ACCEPTED ITA NO. 5442/DEL/2010 5 THE PURCHASES AND SALES THEN THE BALANCE IN THE SUN DRY CREDITORS ACCOUNT CANNOT BE ADDED BY HIM. REGARDING THE SPECIF IC OBJECTIONS OF THE AO IN HIS REMAND REPORT ON THE ISSU E OF OTHER LIABILITIES CREDIT OF ` 13 85 462/- THE APPELLANT H AS PROVIDED THE BREAK UP THEREFORE WHICH COMPRISES OF EXPENSES PAYAB LE FOR RS. 5 35 002/-; SUPERANNUATION PAYABLE OF RS. 53745/-; SALARY PAYABLE OF RS. 4 97 093/- PROVISION FOR EXPENSES FO R RS. 2 84 099/- AND FULL AND FINAL PAYABLE OF RS. 15 523 /-. THE COPY OF ACCOUNT OF ALL THESE EXPENSES FOR FY 03-04 AND 04-0 5 TOGETHER WITH THE DETAILS OF PAYMENT IN THE SUBSEQUENT FINANC IAL YEAR HAVE BEEN PROVIDED. ON A PERUSAL THEREOF IT IS CLEAR T HAT THERE IS NO CASH CREDIT INVOLVED IN THESE ACCOUNTS WHICH ARE RU NNING ACCOUNTS FOR PAYMENT OF VARIOUS LIABILITIES FOR SERV ICES. FURTHER THE COPY OF ACCOUNT OF DABUR INDIA LTD. HAVING A CRE DIT BALANCE OF RS. 7 76 772/- HAS ALSO BEEN FURNISHED AND THAT THI S LIABILITY HAS BEEN WRITTEN BACK IN THE NEXT FY 04-05 LASTLY MANTE QUERIAS ARIAS SA CREDIT OF RS. 11 21 964/ IS ALSO NOT A CASH CRE DIT ACCOUNT BUT THAT FROM THIS PARTY THE APPELLANT HAD PURCHASED A MACHINERY VIZ. SECOND HAND ULTRA FILTRATION MACHINE USED FOR MANUFA CTURE OF PANEER. THAT THIS BALANCE AMOUNT FOR RS. 11219641- I S OUTSTANDING EVEN TO THIS DATE ON ACCOUNT OF DISPUTE . KEEPING IN VIEW AN THE DETAILS FILED BY THE APPELLA NT AND ITS SPECIFIC REPLY TO THE REMAND REPORT AND SUBMISSION A ND DETAILS BY THE APPELLANT IT IS CLEAR THAT NONE OF THE SUNDRY CREDITORS IS A CASE OF CASH CREDIT U/S 68 OF THE IT ACT AND ALL TH ESE AMOUNTS PERTAIN TO TRADE CREDITORS EITHER FOR SERVICES OR GOODS AND THEREFORE THE ADDITION MADE IN THIS ROUND OF APPEAL FOR RS. 58 50 305/- IS ACCORDINGLY DIRECTED TO BE DELETED. ITA NO. 5442/DEL/2010 6 10. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BE FORE US. 11. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S GONE THROUGH THE ASSESSEES SUBMISSIONS AND ALSO OBTAINED REMAND REPORT FROM THE ASSESSING OFFICER. ON THE BASIS OF DETAILS SUBMITT ED HE HAS GIVEN A FINDING THAT NONE OF THE SUNDRY CREDITOR IS A CASE OF CASH CREDIT U/S 68 AND ALL THESE AMOUNTS PERTAIN TO TRADE CREDITORS EI THER FOR SERVICES OR GOODS. THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT BEEN ABLE TO CONTROVERT THESE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. 12. THE NEXT ISSUE RAISED IS THAT LD. COMMISSIONE R OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION OF ` 8 86 000/- MADE U/S 40A(2)(B) OF THE ACT. 13. ON THIS ISSUE ASSESSING OFFICER NOTED THAT A SUM OF ` 8 86 000/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S 4 0A(2)(B) ON ACCOUNT OF EXCESSIVE /UNREASONABLE PAYMENT MADE TO SH . SUMIT ANAND DIRECTOR. 14. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ISSUE AND HELD AS UNDER:- SO FAR AS PAYMENT TO SH. SUMIT ANAND THE THEN CEO OF THE COMPANY IS CONCERNED THE APPELLANT HAS INVITED ATTEN TION TO THE COPY OF CONTRACT FOR EMPLOYMENT AND HIS POWERS AND QUALIFICATIONS WHICH HAVE BEEN FILED IN THE PAPER B OOK DATED 04.12.08. IT HAS ALSO BEEN SUBMITTED THAT THESE DOCU MENTS COULD NOT FILED EARLIER AS THE APPELLANT COMPANY WAS OF TH E BONA FIDE ITA NO. 5442/DEL/2010 7 BELIEF THAT IT'S EXPLANATION HAD BEEN ACCEPTED. IT IS OBSERVED FROM THE CONTRACT OF THE EMPLOYMENT SHRI SUMIT AMMD WAS IN ITIALLY DESIGNATED AS MANAGER - DEVELOPMENT AND ON SUCCESSFUL PERFORMANCE WITHIN A PERIOD OF 6 MONTHS FROM THE DATE OF JOINING SHRI SUMIT ANAND WAS SUBSEQUENTLY MADE A CEO VIDE T HE MEETING OF THE BOARD OF DIRECTORS DATED 07.12.01 AND EFFECTIVE FROM 01.01.02. ON A PERUSAL OF THESE DOCUMENTS OF TH E APPELLANT IT IS OBSERVED THAT SHRI SUMIT ANAND IS ESSENTIALLY IN EMPLOYMENT OF COMPANY AND THEREFORE HIS CASE IS NOT COVERED WIT HIN THE PERSONS REFERRED TO IN SECTION 40A(2)(B) OF IT ACT AND THEREFORE THE EXPENDITURE ON HIS HIRING OF AS CEO CANNOT BE HELD TO BE EXCESSIVE OR UNREASONABLE WITHIN THE MEANING OF SEC TION 40A(2)(A). IN VIEW THEREOF THE ADDITION OF RS. 8.86 LACS MADE WITH REFERENCE TO THIS GROUND OF APPEAL IS DIRECTED TO B E DELETED. 15. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BE FORE US. 16. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT BEFORE THE LD. COMMISSIONER OF INCOME TAX ( APPEALS) ASSESSEE HAS SUBMITTED THE NECESSARY DETAILS. ON THE BASIS OF THESE DETAILS LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FOUND THAT SHRI SUMIT ANAND WAS ESSENTIALLY IN EMPLOYMENT OF COMPANY A ND THEREFORE HIS CASE WAS NOT COVERED WITHIN THE PROVISION OF SE CTION 40A(2)(B). THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FOUND TH AT EXPENDITURE OF HIRING IN THIS REGARD WAS NOT EXCESSIVE OR UNR EASONABLE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSION ER OF INCOME TAX (APPEALS). ACCORDINGLY WE UPHOLD THE SAME. ITA NO. 5442/DEL/2010 8 17. THE LAST ISSUE RAISED IS THAT LD. COMMISSIONER O F INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION OF ` 1 1 08 000/- MADE ON ACCOUNT OF NON-ALLOWABLE LIABILITY. 18. ON THIS ISSUE ASSESSING OFFICER HELD THAT AS P ER THE DIRECTIONS OF THE ADD. C.I.T. ` 11.08 LACS WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF NON-ALLOWABLE LIABILITY BEI NG UNPAID SALES TAX. 19. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ISSUE AND HELD AS UNDER:- AS REGARD DISALLOWANCE OF ` 11.08 LACS ON ACCOUNT OF SALES TAX PENDING IN TERMS OF SECTION 43B OF THE ACT THE APPE LLANT HAS SUBMITTED THAT THE AMOUNT OF ` 11.08 LACS IS APPEARI NG IN THE NOTES TO ACCOUNTS AS THE CONTINGENT LIABILITY. THAT SINCE THIS AMOUNT OF LIABILITY TO SALES TAX IS DISPUTED AND IS ONLY A CONTINGENT LIABILITY THEREFORE THERE IS NO QUESTION OF APPLICATION OF SECTION 43B TO THIS AMOUNT OF SALES TAX. MOREOVER FRO M THE COPY OF NOTES TO ACCOUNT IT IS SEEN THAT THIS CONTINGENT LIABILITY HAS BEEN SHOWN FROM AN EARLIER PERIOD THAT IS EVEN ON 3 1.03.03 AND THEREFORE IT DOES NOT PERTAIN TO THE YEAR CONSIDERA TION. KEEPING IN VIEW THE ABOVE SUBMISSION AND THE FACT THAT THIS IS MERELY A CONTINGENT LIABILITY WHICH IS DISPUTED BY THE APPEL LANT NO ADDITION U/S 43B CAN BE MADE WITH REFERENCE TO THE AMOUNT OF ` 11.08 LACS WHICH IS ACCORDINGLY DIRECTED TO BE DELETED. 20. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BE FORE US. 21. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S GIVEN A FINDING THAT THE LIABILITY INVOLVED DID NOT PERTAINS TO THE YEAR UNDER ITA NO. 5442/DEL/2010 9 CONSIDERATION. HE HAS ALSO FOUND THAT IT IS MERELY A CONTINGENT LIABILITY WHICH IS DISPUTED BY THE ASSESSEE. HEN CE HE HAS FOUND THAT THE ADDITION WAS NOT COMING U/S 43B. THE LD. DEPA RTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THESE FINDINGS. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSION ER OF INCOME TAX (APPEALS). HENCE WE UPHOLD THE SAME. 22. IN THE RESULT THE APPEAL FILED BY THE REVENU E STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/7/2011. SD/- SD/- [A.D. JAIN] [A.D. JAIN] [A.D. JAIN] [A.D. JAIN] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JU JUJU JUDICIAL MEMBER DICIAL MEMBER DICIAL MEMBER DICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 20/7/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3.CIT 4.CIT (A) 5. DR IT AT TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT DELHI BENCHES